Westgrund AG digests Berlinovo buy, prepares for further growth
We reported recently in REFIRE on how the small listed Berlin-based residential housing investor Westgrund AG had practically tripled in size overnight when it acquired 13,300 apartments from Berlinovo, a legacy portfolio held by the state of Berlin.
REFIRE sat down recently with Arndt Krienen, the veteran CEO of Westgrund, to learn more about the company’s strengths and strategy. The company has just tripled its nine-month net profits to €28.5m, spurred on by valuation improvements in its fast-growing residential portfolio. It has also just pushed through a €140m capital increase, and upgraded its listing to the more demanding Prime Standard on the Frankfurt Stock Exchange at the end of September.
The Berlinovo acquisition was covered by short-term bridge financing provided by Barclays, but this is now about to be replaced by long-term financing from LBBW, likely at about 2.5% for a 7-year loan. This will lower Westgrund’s overall average interest burden to under 3%.
Over the first three quarters Westgrund boosted revenues year-on-year by 53.8% from last year’s €10.6m to €16.3m, at the same time pushing pre-tax profits up to €34.1m from €11.2m. This came not only from valuation improvements of €42.5m (last year €9.5m) but also one-off financing costs for the big recent acquisition and non-cash mark-to-market movements of interest rate swaps
The company’s NAV of €293m is comfortably ahead of the share price, and Krienen said he expects further NAV and net rental growth in the last quarter and through 2015. In the short term reducing vacancies in the new portfolio will be a priority, as well as targeting a further spate of acquisitions to bring the group up to 30,000 or 40,000 units. It currently owns about half that amount, mainly now concentrated in Berlin, Lower Saxony, Dresden, Halle and Leipzig.
Founded in 1990 and listed since 1998, Westgrund’s philosophy is to invest only in assets with a positive cash-flow on purchase. Swiss family office Wecken is the majority shareholder, with 36%, Cyprus-based Quartenal Investments holds 9.7%, Allianz Global Investors 3.6%, Swanepoel 3.9% and 49.3% is now free float.